Scandal at Hale House

Sifting through the rubble of a once-proud nonprofit

In 1985, Mother Clara Hale’s home for drug-addicted children was among the most famous charities in the world. In January of that year, President Ronald Reagan invited Mother Hale to be his guest at the State of the Union address. He called her an “American heroine” and awarded her the Presidential Medal of Freedom, the highest honor the United States bestows upon a civilian, for her work to save, love, and nurture drug-addicted and other abandoned babies and young children. Celebrity supporters at the time included Princess Diana, Rosie O’Donnell, and Sarah Ferguson. Hale went on the Phil Donahue show, and private donations from groups like the National Mother’s Day Committee poured in.

Now, Hale House is in disgrace. Clara Hale’s daughter, 75-year-old Lorraine Hale, was forced to resign as president and CEO this May amid allegations of financial impropriety and mismanagement. New York state attorney general Eliot Spitzer is in the middle of an ongoing criminal investigation of the institution’s key players. And a new board has been appointed to sift through the financial and legal rubble.

Anatomy of a Disaster
In 1940, “Mother” Clara Hale of Harlem took in a drug-addicted baby. Soon, another was left with her, and then another, until there were cradles all over her five-room apartment. By the time she received her Congressional medal, Hale had taken in hundreds of addicted children and had received hundreds of thousands of dollars from various New York City social service agencies. After President Reagan’s speech, the city would kick in an additional $1.9 million to construct a home where former addicts would learn to live with their children again. Meanwhile, the federal government gave millions to expand the program.

As Mother Hale grew older, the task of running the increasingly complex organization fell to her daughter, Lorraine Hale, who held a doctorate in early childhood development. When Mother Hale died in 1992, Lorraine took over as president and CEO. She immediately began planning a major expansion of the home’s services, with new branches to be built in drug-plagued cities up and down the East Coast, and embarked on a prodigious fund raising campaign that netted more than $40 million in less than eight years.

So where did all the money go? According to the Better Business Bureau, last year Hale House spent less than half its money on services for the children in its care. The attorney general’s office reports that money went to support a stunning variety of perks for Hale, including a $450,000 collection of African American art and a posh executive suite that she was careful never to let reporters see. (Former staff members claim she would tell them she wanted “to set an example for [the] children so that they see a better life.”) Despite her $200,000 salary, she admitted to borrowing over $100,000 from the charity to give her Scarsdale home a facelift.

Through her lawyer, Hale has also admitted to funneling “hundreds of thousands of dollars” of Hale House funds into a failed off-Broadway play produced by her husband, Jesse DeVore (who also collected a $110,000 salary as Hale House’s director of public relations).

Hale insists that she paid the money back. Records show, however, that of the $560,000 in charitable donations spent on the play, Hale only returned about $160,000. Perhaps more distressingly, throughout the investigation Hale claimed not to know that it was illegal to borrow money from the charity for home renovations or to use donor money to finance her husband’s play. (In press reports, Hale blamed Hale House accountants for not informing her. Through her attorney’s office, she declined to be interviewed for this story.)

Hale was also accused of illegally renting out apartments meant for former drug-addicted mothers and their children to wealthier tenants and of sending the state a bogus list of her organization’s board of directors, which included a deceased woman as treasurer. The attorney general’s office is also investigating whether Hale hid children from state inspectors and raised money for programs that never existed.

Once the allegations became public, Hale agreed to resign, only to recant later, saying she had been pressured into the decision and had not had the benefit of counsel. The new, state-appointed board promptly fired her, citing “substantial and credible evidence that Hale House engaged in transactions involving self-dealing and other conflicts of interest.” In a news conference, Hale said the board of directors “relied on rumor, innuendo, and unsubstantiated allegations reported in the press” in forcing her out.

At the time of writing, Spitzer’s office is still probing the Hale House situation; officials there expect the investigation to be finished this summer. “Our goal,” says a spokesperson from Spitzer’s office, “is to restore the charity to its original purpose.”

Life on the Inside
The New York Daily News originally broke the story of Hale House, and the paper’s reports paint a horrifying picture of life inside the once-great charity. A contractor who worked with Hale recounted how she refused to call in an exterminator to deal with a roach infestation in the 100-year-old building on West 122nd Street in Harlem that serves as the organization’s headquarters. “There were always roaches in that room filled with cribs. You’d see them come and go. It always bothered me. She had to take care of the roof, but I really wanted her to take care of the roaches.” According to the contractor, Hale was reluctant to pay the $1,800 he would have charged to exterminate and redo the area.

Children frequently went unsupervised at Hale House, according to the Daily News, with two staff members attempting to watch as many as 20 or 21 children at a time. (The industry standard for orphanages and child care facilities is around four children per adult.) Medical records for children were nonexistent and required vaccinations were out of date. The new board is also reviewing the cases of at least 19 children whom Hale placed for adoption—adoptions that investigators say were often conducted haphazardly, with no follow-up visits scheduled and other required procedures ignored.

At the time of Lorraine Hale’s ouster, a staff doctor also resigned from Hale House once it was revealed that he was not licensed to practice medicine in the United States. According to press reports, the new board also cancelled weekly visits by a chiropractor whom Hale had hired to provide “adjustments” to the babies’ spines.

The new board estimates that over $1 million will be spent cleaning up the mess Hale left behind, even with the pro-bono help the charity is getting from lawyers, accountants, and doctors. The United Way has retained a management consultant team and sent over an accounting team to help get Hale House’s books in order. Bank Street College of Education has provided a consultant to help establish an educational program, and children have been placed in pre-school for the fall. An adoption attorney is poring through adoption and foster care paperwork to determine whether regulations were followed.

More importantly, the new board has adopted an activist stance in dealing with the problems, says chairman Zachary Carter, an attorney and former federal prosecutor.

“During the first board meeting we were anguishing over the fact that we now have 16 kids—twelve toddlers and four infants. And we just said, ‘What do we do now? What do we do, first of all, to make sure that they are healthy?’” Board member Elsie Crum McCabe, chief of staff under former Mayor David Dinkins, called the head of pediatric medicine of North General Hospital, who arrived on the premises an hour later with a social worker to examine the kids. “That’s what happens when you have a functioning board of well-connected, energetic, committed people. That is what, sadly, the prior regime denied itself when they avoided scrutiny, oversight, and the involvement of others,” says Carter.

Rebuilding Faith
Rebuilding the trust of the community, of course, will be a monumental task. T. K. Handy, currently running daily operations at Hale House, recounts a reception she attended at Gracie Mansion, New York City’s mayoral residence, where a woman who was near tears approached her and said, “‘Mother Hale took my son in. My life was a mess.’ She used that as a jumping-off point to talk about how hurt she is.”

Donations have dropped nearly 90 percent from last year, and the annual fund raiser has been cancelled in the wake of Lorraine Hale’s departure. For the time being, Hale House is operating with a several million dollar nest egg that was left when Hale departed. According to Carter, “It won’t last forever. . .. But we are substantially ahead of similarly situated nonprofits in terms of having sufficient funds available to give these kids and their families first-rate services.”

There are no plans to start raising funds again until financial and administrative integrity has been restored, Carter says. “Right now our focus is on turning the program around so that when we ask for funds, we can do it confident that people will get to see the value of their donations.”

The task of sorting out the mess will take months, but already life has improved for the children at Hale House, who today get to participate in normal activities for kids, such as visiting museums and parks and eating at McDonald’s— “a far and fun cry,” reports the Daily News, “from a holistic diet heavy on bulgur, millet, and stewed fish that Hale insisted on, forbidding them cookies, ice cream, and other treats.” The Daily News describes the dramatic change:

Staffers are now allowed to take lunch, are paid overtime if they stay late and are encouraged to participate in simple decisions previously micromanaged by Hale—such as whether their charges should wear sandals.

And whereas the children’s days have been marked only by three meals and endless hours in their Spartan rooms or a small backyard, there are now two playrooms filled with books, blocks, scribble pads, stuffed animals, and a piano. Guest artists are set to perform at the home every Friday. And tape players—once a luxury found only in Hale’s ornate, antiques-filled office—are on order for the children.

In short, everything the world thought the children at Hale House had been getting for years is now beginning to take form.

And what of the lessons learned? Says Carter, “I desperately hope that we never reach the point where we think we know so well where Hale House should be going that we won’t listen to other voices that may have a different view. That would not be in the best interest of the kids.”